Comparative Study Between Ulip & Elss

1. INTRODUCTION

1.1 INTRODUCTION

Investors are confronted with the problem of choosing the best investment

opportunities in the financial market in order to earn higher return for their

investments. The complexities of financial market can be dealt with certain

intuitions with sound technical back ground. A small investor cannot afford to

invest sizeable amount to maintain their position in fact with market conditions. A

mutual fund foresees market conditions and invests substantial funds collected

from the pool of investors.

Whatever be the type of investor there is a mutual fund that fits everyone.

It is important to understand that each mutual fund has different risks and

rewards. In general, the higher the potential return, higher the risk of loss.

Although some funds are less risky than others, all funds have some level of risk-

it's never possible to diversify away all risk. This is a fact for all investments.

Each fund has a predetermined investment objective that tailors the fund's

assets, sectors of investments, and investment strategies.

All mutual funds are varying based on their asset classes. For example,

while equity funds that invest in fast-growing companies are known as growth

funds, equity funds that invest only in companies of the same sector or region are

known as specialty funds. Hence Mutual Funds have their own risk and return

potential.

There are a number of investment options available in the economy. But

there are some investment options available that provides both saving benefit

and return benefits particularly tax benefits. Hence it becomes necessary to

study the investment option which gives maximum benefits to the investor

1.2 STATEMENT OF PROBLEM

Mutual funds could not survive in the early years of inception and went

dark. The initiation made by the government results in the development of Mutual

fund growth in the economy. At the same time the products by Insurance

companies prevail as a good investment option for the investors from the early

periods. Hence the growth of economy made opportunity available to the

investors. The government of India encouraged public sector mutual Funds, set

up public sector Banks and Insurance Corporation. It was not sufficient to

mobilize potential investment and it promoted the private sector Mutual Funds in

1993. Hence there are dozens of leading Mutual funds and Insurance

Companies in the economy. Therefore it is worth while to measure the

performance and benefits to the investors. Such comparison will bring to light any

loopholes in the present system and to offer such suggestions based on such

comparison.

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2. COMPANY PROFILE

HDFC STANDARD LIFE INSURANCE

HDFC and Standard Life first came together for a possible joint venture, to

enter the Life Insurance market, in January 1995. It was clear from the outset

that both companies shared similar values and beliefs and a strong relationship

quickly formed. In October 1995 the companies signed a 3-year joint venture

agreement.

Around this time Standard Life purchased a 5% stake in HDFC, further

strengthening the relationship. The next three years were filled with uncertainty,

due to changes in government and ongoing delays in getting the IRDA

(Insurance Regulatory and Development authority) Act passed in parliament.

Despite this both companies remained firmly committed to the venture.

In October 1998, the joint venture agreement was renewed and additional

resource made available. Around this time Standard Life purchased 2% of

Infrastructure Development Finance Company Ltd. (IDFC). Standard Life also

started to use the services of the HDFC Treasury department to advise them

upon their investments in India.

Towards the end of 1999, the opening of the market looked very promising

and both companies agreed the time was right to move the operation to the next

level. Therefore, in January 2000 an expert team from the UK joined a hand

picked team from HDFC to form the core project team, based in Mumbai.

Around this time Standard Life purchased a further 5% stake in HDFC and

a 5% stake in HDFC Bank. In a further development Standard Life agreed to

participate in the Asset Management Company promoted by HDFC to enter the

mutual fund market. The Mutual Fund was launched on 20th July 2000

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2.1 STATEMENT OF OBJECTIVES

Following are the objectives of the study:

► To find the awareness among the customers about investment

alternatives.

► To indicate the Schemes which provides higher returns to the Investors

and also tax benefits.

► To compare the performance of ELSS with ULIP.

► To find the reasons which influence the decision of investors to choose a

particular investment.

► To identify the drawbacks in promoting products of HDFC Mutual Funds

2.2 HYPOTHESIS

1) There is no significant relationship between nature of investment and

choice of schemes.

2) There is no significant relationship between reasons to influence decision

of investors and range of income.

3) There is no significant relationship among awareness of customers and

qualification of respondents.

4) There is no significant relationship between drawbacks in promoting

products and choice of investment.

5) There is no significance relationship between the range of income and risk

taking capacity.

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3. THEORETICAL FRAMEWORK

MUTUAL FUNDS

A mutual fund is a pool of money, collected from investors and is invested

according to certain investment objectives.

A mutual fund is created when investors put their money together. It is

therefore a pool of the investor’s funds. The most important characteristic of a

mutual fund is that the contributors and the beneficiaries of the fund are the same

class of people, namely the investors. The term mutual means that investors

contribute to the pool and also benefit from the pool.

A mutual fund’s business is to invest the funds thus collected, according to

wishes of the investors who created the pool.

CHARACTERISTICS OF MUTUAL FUND

A mutual fund belongs to the investors who have pooled their funds. The

ownership of the mutual fund is in the hands of the investors.

Investment professionals and other service providers, who earn a fee for

their services, from the fund, manage the mutual fund.

The pool of funds invested in a portfolio of marketable investments. The

value of the portfolio is updated everyday.

The investor’s share in the fund is denominated by “units”. The value of

the units changes with change in the portfolio’s value, everyday. The value

of one unit of investment is called as the Net Asset Value (NAV).

The common retort to the oft-asked question by anxious investors, of the

best way to save tax, is to invest in Post Office savings schemes, or perhaps a

regular investment in a public provident, or to buy insurance policies or Equity

Linked Saving Schemes.

ELSS holds the advantage of being the equity-based tax saving

instrument in the country today and offers tax deduction on investments up to

Rs.100000, under Section 80C of the Income Tax Act.

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EQUITY LINKED SAVING SCHEME

Equity Linked Saving Schemes (ELSS) is similar to the normal equity

diversified schemes that invest across the board and market segments. Features

that differentiate ELSS from an open-ended equity diversified scheme are tax

saving benefit (deductions under Sec 80C) and a lock-in period of three years,

which are explained hereunder. Also, one can invest in these schemes in small

amounts through a Systematic Investment Plan and begin with a small fund size

to add to this expense (i.e.) of investing in an ELSS is similar to any other equity

scheme.

Tax

Benefit:

Until FY 05, Sec 88 of Income Tax Act had fixed an overall ceiling of

Rs.100000 for investments in the tax saving instruments, including a cap of

Rs.10000 for investment in ELSS. The investors would get a rebate based on his

taxable income. In FY 05 the budget has scrapped Sec 88 and replaced it with

Sec 80C. under this section, investments up to Rs.100000 are eligible for

deduction from Gross Taxable Income and the ceiling on investments in ELSS is

removed. These investments deducted from the Gross Total Income, hence

reducing the taxable income.

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ELSS

Better Return than that of other savings instruments and similar to other equity schemes

Saves from short-term volatility: Lock in of 3 years

Tax Benefit:Up to Rs.1 lakh, u/s Sec 80C

Illustration:

Particulars Rupees(till 05) Rupees (after 05)

Gross Total Income 4,00,000 4,00,000

(-) Deductions Nil 1,00,000

Taxable Income 4,00,000 3,00,000

Advantages of Lock-in-period

The close-ended nature of the scheme gives the investment team an

opportunity to take decisions without the pressures of dealing with constant

fund cash flow considerations.

This would also help to focus on long-term opportunities in mid-cap

and small-cap companies that are strategically placed to take advantage of

the robust economic growth in India and of the global outsourcing trend.

Since the fund would remain with the fund manager for a long duration,

it would give him more flexibility with regards to the illiquid nature of mid-cap

space. Therefore, the Fund is likely to perform better than an open-ended

scheme.

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ELSS VS ULIP

ULIPs basically works like a mutual fund with a life cover thrown in. they

invest the premium in market-linked instruments like stocks, corporate bonds and

government securities. Investments in ULIPs attract Tax benefit under Section

80C.

A tax –saving fund is a diversified equity fund. It works like an open-ended

diversified equity fund that invests predominantly in the stock market to generate

growth by way of capital appreciation for investors.

The only difference between an equity fund and taking a tax saving fund is

that the latter has a 3-year lock-in tax benefits under Section 80C. To that end

there is a common ground between tax-saving funds and ULIPs in the shape of

Section 80C tax benefits.

RETURN ASPECTS

The reason why ULIP returns are on the lower side compared to tax-

saving funds is due to the higher expenses charged by them. The expenses take

their toll on the ‘investible surplus’ which reduces to the extent of expenses.

For example, mortality charges as well as the commission paid to agents

are factored into the ULIP expenses. While mortality charges are unique to

ULIPs as compared to tax-saving funds, commissions form a part of tax-saving

funds as well.

Tax-saving funds offer is the option of staying invested in the scheme

during maturity. But ULIP do not give the option of staying invested. The investor

has to necessarily collect the maturity proceeds.

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Age

Life

Insurance

Premium(Rs)

EPF(Rs) PPF / NSC ELSS

Total

Deduction

u/s 80C

25-35 10% 20% 20% 50-60% 1,00,000

35-40 10% 30% 25% 35-40% 1,00,000

45-55 10% 35% 30% 25-30% 1,00,000

>55 10% 0 65% 20-25% 1,00,000

TAX ASPECTS

Income Tax Provision Impacting Investment in Mutual Funds:

Investors receive two types of incomes from investment in Mutual Funds,

namely, Dividends declared from time to time by the mutual fund and Capital

Gains arising out of redemption of mutual fund units. Both these incomes are

subject to the provisions of the Income Tax Act, 1961.

The following are the Tax provisions, applicable after the Finance Act 2006-

07:

Dividends from mutual funds for the year 2006-07 are tax-free in the

hands of investors.

In case of mutual fund scheme with more than 50% in debt, a dividend

distribution tax of 10% plus surcharge has to be paid by the mutual funds.

In case of mutual funds scheme with more than 50% in equity, the

dividend distribution tax is not to be paid

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INVESTMENT IN ELSS:

Investment in specific Equity Saving Schemes, as notified by the

Government of India, are eligible for tax rebate under Section 88, up to a

maximum limit of Rs.10000 on the investment. The rebate is available according

to the taxable income of the investor.

Taxable Income Available IT Rebate Maximum Amount of

Rebate

Up to Rs.10,00,000 30% of the investments

made

Rs.3000

> 1.00 lakh < 1.5 lakh 20% of the investments

made

Rs.2000

> 1.5 lakh 15% of the investments

made

Rs.1500

Investors whose taxable income exceeds Rs.5 lakh are not eligible for any

tax rebates under Section 88.

A mutual fund which is registered under the SEBI (mutual Fund)

Regulation, 1996 is fully exempt from paying tax on its incomes, under section 10

(23D) of the IT Act. Since it is only a pass through entity, income is not taxed in

the hands of the mutual fund.

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4. RESEARCH METHODOLOGY

INTRODUCTION

Research methodology is a systematic way that solves the research

problem. It may be understood as a science of studying how research is done

scientifically. It is, we study the various steps that are generally adopted by a

researcher in studying the research problem along with the logic behind them. It

is necessary for the researcher to know not only the research methods or

techniques but also methodology. Researcher need to know how to develop the

tests, how to calculate the mean , how to apply research techniques which are

relevant and which not the knowledge of research methodology provides tools to

take things objectively.

4.1 RESEARCH DESIGN

Research design is a plan of action that guides the entire research. There

are four types of research design

a) Exploratory research design

b) Descriptive research design

c) Diagnostic research study

d) Experimental research design

The researcher has adopted Descriptive Research design.

4.2 SAMPLE SIZE

The sample size for the study is 120. It is derived from the universe of

250.

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4.3 SAMPLING METHOD

The sample design used by the researcher in this study is Systematic

Sampling Method. The list of investors in Equity Linked Saving Scheme given by

HDFC Mutual Funds were assigned with numbers. The even numbers have been

chosen as samples.

4.4 PRE-TESTING

Pre-testing as it is known is a method which has to be followed strictly.

Once questionnaire is drafted it should be field tested before finalizing. The

responses are studied to determine the need for restructuring the questionnaire.

Pre-testing was done on a group of 15 respondents. With the result of the pre-

testing the researcher has reframed some of the questions.

4.5 PERIOD OF STUDY

The period of study is from JANUVARY 2007 to APRIL 2007.

4.6 SOURCES OF DATA

a. Primary Data:

Primary data are generally information gather or generated the researcher

for the purposes of the project immediately at hand. When the data are collected

for the first time, the responsibility rests with the researcher to analyze as well.

Primary data has been collected through a structured questionnaire.

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b. Secondary Data:

Data that has already been collected for some other purpose, perhaps

processed and subsequently stored, are termed Secondary Data. The main

types of secondary data: Documentary, surveys and those from multiple sources.

Researcher has used all the types of secondary data to solve the problem.The

secondary data for the study has been extracted from text-books, offer

documents, magazines and through websites.

The data that have taken for the study is collected from source are:

Published information and other report of HDFC Mutual fund.

Other published material of mutual fund

Records and information available with the fund manager.

Data and information available with SEBI.

Article and information published in various journals.

Other information necessary for the study has been obtained from various

books, journals etc.

4.7 QUESTIONNAIRE DESIGN

Quite often questionnaire is considered as the heart of survey operation.

Hence it should be very carefully constructed. A questionnaire was prepared with

the combinations of various type of questions which have been listed below. The

number of questions used under each type are 2 Yes/No questions, 11 closed

ended questions, 2 open ended questions and 1 Scaling/Ranking question.

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4.8 STATISTICAL TOOLS

The various statistical tools used by the researcher for data analysis in this study

are:

PERCENTAGE ANALYSIS

Percentage refers to a special kind of ratio in making comparison between

two or more data and to describe relations between the data. Percentage can

also be used to compare the relative terms, the distribution of two or more series

of data. The formula used here is given below:

Percentage (%) = No. of respondents Total no. of respondents

WEIGHTED AVERAGE

Weighted average means assigning weight standards for the relative

importance of relative item. The weight stands for the relative Importance for

different items.

Weighted average method = ( X1W1+X2W2+X3W3+…….)

N

STEPS:

1. Multiply the weights with variable X and obtain the value ΣWX

2. Divide the total by the sum of weight ΣW

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CHI-SQUARE TEST:

Chi-square test is an important test among the several tests of

significance developed by statisticians. It is a statistical measure used in the

context of sampling analysis for comparing a variance to a theoretical variance.

The Chi-square is one of the most popular statistical inference procedures

today. With the help of Chi-square test we can find out whether two or more

attributes associated or not.

In order to test whether or not the attributes are associated we can take

null hypothesis that there is no association in the attribute under the study or the

attributes are independent.

If the calculated value of Chi-square test is greater than the table value at

a certain level of significance (generally 5%), we say from results that the

attributes are not associated.

The formula used here is given below:

n

χ² = Σ (O – E )²

i=1 E

Where O = Observed frequency from the cell.

E = Expected frequency from the cell.

E = Row Total* Column Total

Grand Total

Degrees of freedom = (r-1)(c-1)

Where r = Number of rows in the column.

c = Number of columns in the table.

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ANALYSIS OF VARIANCE (ANOVA)

ANOVA is essentially a procedure for testing the difference among

different groups of data for homogeneity.

ANOVA consists in splitting the variance for analytical purpose. Hence, it

is a method of analyzing the variance to which a response is subject into its

various components corresponding to various sources of variation.

Correction Factor = (T)²

n

Total sum of Squares = ΣX²ij – (T)²

n

Where i = 1,2,3,….

j = 1,2,3,…

Between Sum of Square = Σ (Tj)² - (T)²

nj n

Where j =1,2,3,….

Error Sum of Squares = Total Sum of Squares – Between Sum of Squares.

= ΣXij² - Σ (T)²

nj

where i = 1,2,3,…

j = 1,2,3,…

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SHARPE’S RATIO:

William F.Sharpe (1966) devised an index of portfolio performance measure. He

assumes that a small investor invests fully in the mutual fund and does not hold

any portfolio to eliminate unsystematic risk and hence demands a premium for

the total risk.

Sp = Rp – Rf

σ p

Where Sp = Sharpe’s Ratio,

Rp = portfolio return,

Rf = risk free return, and

σp = standard deviation of portfolio returns.

The Sp for benchmark portfolio is Rm - Rf/ σm

where σm = standard deviation of market returns.

If Sp of the mutual fund scheme is greater than that of the market portfolio,

the fund has out performed the market.

TREYNOR’S RATIO:

In Treynor’s measure, the risk measure of standard deviation, namely total

risk of the portfolio is replaced by market risk, measured by Beta, which is not

diversifiable. The can be set out as

Tn = Rn-Rf

βn

Where

Tn = Treynor’s measure of evaluation.

Rn = Return on the portfolio,

Rf = risk free rate

βn = Beta of the portfolio as a measure of systematic risk.

The Sharpe’s measure relates a portfolio’s excess return to total risk (as

measured by the standard deviation), while the Trenyor measure relates a

portfolio’s excess return to non-diversifiable or systematic risk (as measured by

the beta coefficient).

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4.9 SCOPE OF THE STUDY

HDFC has various operations like Banking, Insurance, and Mutual Funds

etc. The scope of this study is restricted to Mutual Fund investors only. It is

confined to customers of HDFC Standard life insurance, mutual funds and

concentrates only on the comparison of ELSS and ULIP.

4.10 LIMITATIONS OF THE STUDY

The edifice of this study entirely stands up on the pillars of information

supplied by the respondents.

Limitations applicable to questionnaire method of research may be applicable

to this study also, such as biased answer, memory access variations, in co-

operative and doubtful approach.

The time for the study was very short.

Secondary data available for comparative analysis is only for the period of

2005-2007.

Due to various factors associated, the information provided by customers has

its own bias.

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5. DATA ANALYSIS AND INTERPRETATION

The data, after collection, has to be processed and analysed in

accordance with the outline laid down for the purpose at the time of developing

the research plan. This is essential for a scientific study and for ensuring that we

have all relevant data for making contemplated comparisons analysis.

Technically speaking, processing implies editing, coding, classification and

tabulation of collected data, so that they are amenable to analysis.

The term ‘analysis’ refers to the computation of certain measures along

with searching for patterns of relationship that exist among data groups-thus, “ in

the process of analysis, relationships or differences supporting or conflicting with

original or new hypothesis should be subjected to statistical tests of significance

to determine with that validity data can be said to indicate any conclusions.

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TABLE-1

AGE OF RESPONDENTS

AGE NO.OF RESPONDENTS PERCENTAGE20-30 26 21.6731-40 34 28.3341-50 39 32.5>50 21 17.5

TOTAL 120 100

INFERENCE:

From the above table, it is clear that 32.5% are in the age group of 41-50,

28.33 % of are in the age group of 31-40, 21.67 % of respondents are in the age

group 0f 20-30 and 17.5 % 0f respondents are in the age group of above 50.

CHART1

20

TABLE-2

EDUCATION LEVEL OF RESPONDENTS

QUALIFICATION NO OF RESPONDENTS PERCENTAGESSLC 8 6.67+2 20 16.67GRADUATION 54 45POST GRADUATION 38 31.67

TOTAL 120 100

INFERENCE:

From the above table, it is clear that 45% of respondents are Graduates,

31.67 % of respondents are Post Graduates,16.67% of respondents are +2 and

6.67 % of respondents are SSLC.

CHART2

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TABLE-3

OCCUPATION OF RESPONDENTS

OCCUPATION NO OF RESPONDENTS PERCENTAGEIT 25 20.83MANUFACTURING(PVT) 18 15SELF EMPLOYMENT 24 20GOVT SECTOR 13 10.83OTHERS 40 33.33

TOTAL 120 100

INFERENCE:

From the above table, it is clear that 20.83% of respondents are from IT

sector, 15 % of respondents are from Manufacturing & private sector, 20 % of

respondents are from Self Employment, 10.83 % of respondents are from Govt

Sector and 33.33% are from Others category.

CHART 3

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TABLE -4

MONTHLY INCOME OF RESPONDENTS

MONTHLY INCOME NO OF RESPONDENTS PERCENTAGEBELOW 20000 56 46.6720-50000 38 31.6750-80000 14 11.67ABOVE 80000 12 10

TOTAL 120 100

INFERENCE:

From the above table , it is clear that 46.67 % of the respondents have

income level of below Rs.20000 per month, 31.67 % of the respondents have

income level between 20 to 50000 per month, 11.67 %of the respondents have

income level between 50 to 80000 and 10 % of the respondents have income

level above 80000 per month.

CHART 4

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TABLE-5

AVENUES OF INVESTMENT

OPTIONS NO OF RESPONDENTS PERCENTAGEMUTUAL FUNDS 22 18.33INSURANCE 24 20SHARES 22 18.33DEPOSITS 19 15.83REAL ESTATE 10 8.33OTHERS 23 19.16

TOTAL 120 100

INFERENCE:

From the above table, it is clear that 20 % of respondents preferred

Insurance, 19.16 % for others, 18.33 % of the respondents invested in Mutual

Funds, 18.33 % for shares, 15.83 for deposits and 8.33 % for Real Estate.

CHART 5

AVENUES OF INVESTMENT

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TABLE-6

REASONS FOR INVESTMENT

REASONS NO OF RESPONDENTS PERCENTAGERISK FREE 20 16.67HIGH RETURN 32 26.67SECURE 22 18.33BETTER MARGIN 28 23.33INTEREST 18 15

TOTAL 120 100

INFERENCE:

From the above table, it is clear that 26.67 % of the respondents opt for

High return, 23.33 % opt for Better margin,18.33 % of the respondents opt for

Secure 16.67 % of the respondents opt for Risk free investment and 15 % opt for

Interest.

CHART 6

25

TABLE-7

AWARENESS OF TAX SAVING SCHEMES

OPTIONS NO.OF RESPONDENTS PERCENTAGEYES 87 72.5NO 33 27.5

TOTAL 120 100

INFERENCE:

From the above table, it is clear that 72.5 % of the respondents are aware

of Tax saving schemes and 27.5 % of the respondents are not aware of Tax

saving schemes.

CHART 7

26

TABLE-8

SCHEME PREFERRED BY INVESTORS IN TERMS OF TAX SAVINGS

OPINION NO OF RESPONDENTS PERCENTAGEELSS 38 31.67ULIP 23 19.16OTHERS 37 30.83NIL 22 18.33

TOTAL 120 100

INFERENCE:

From the above table, it is clear that 31.67 % of the respondents consider

that ELSS is better Tax saving scheme, 30.83 % of respondents consider Others,

19.16 % of respondents consider ULIP as better Tax saving scheme and 18.33%

of respondents consider Nil.

CHART 8

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TABLE – 9

REASONS FOR CHOOSING PARTICULAR INVESTMENT

SCHEMES NO OF RESPONDENTS PERCENTAGETAX BENEFIT 29 24.16FUTURE EXPECTATIONS

28 23.333

PERFORMANCE 14 11.67LIQUIDITY 23 19.16SAVING THE SURPLUS 26 21.67

TOTAL 120 100

INFERENCE:

From the above table it is clear that 24.16 % of respondents have chosen

a particular investment for the purpose of Tax Benefit, 23.33% of respondents

opt because of Future Expectations, 21.67 % of respondents have chosen for the

purpose of saving their surplus, 19.16 % on the basis of Liquidity and 11.67 % of

respondents choose in terms of Performance.

CHART 9

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TABLE - 10

RISK TAKING CAPACITY OF INVESTORS

OPINION NO OF RESPONDENTS PERCENTAGEHIGH RISK HIGH RETURN

42 25

MODERATE RISK MODERATE RETURN

57 47.5

LOW RISK LOW RETURN

21 17.5

TOTAL 120 100

INFERENCE:

From the above table it is clear that, 47.5 % of the respondents are opt for

Moderate Risk Moderate Return, 25 % of the respondents opt for High Risk High

Return and 17.5 % of respondents opt for Low Risk Low Return.

CHART - 10

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TABLE – 11

PREFERRED TENURE OF INVESTMENT

OPTION NO OF RESPONDENTS PERCENTAGESHORT TERM 32 26.67MID TERM 54 45LONG TERM 34 28.33

TOTAL 120 100

INFERENCE:

From the above table, it is clear that 45 % of the respondents preferred for

Mid term investment, 28.33 % of respondents preferred to Long term investment

and 26.67% of respondents preferred Short term investment.

CHART – 11

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TABLE-12

LEVEL OF RETURN EXPECTED

OPINION NO OF RESPONDENTS PERECENTAGELESS THAN 10 % 11 9.16711 – 15 % 32 26.6715 – 20 % 36 30ABOVE 20 % 41 34.167

TOTAL 120 100

INFERENCE:

From the above table it is clear that 34.167 % of respondents expect

above 20 % of return, 30 % 0frespondents expect 15 – 20 % of returns, 26.67 %

of respondents expect 11- 15 % of returns and 9.167 % of respondents expect

less than 10 % of return.

CHART - 12

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TABLE – 13

SATISFACATION TOWARDS PERFORMANCE OF TAX SAVING SCHEME

OPINION NO OF RESPONDENTS PERCENTAGEYES 83 69.17NO 37 30.83

TOTAL 120 100

INFERENCE:

From the above table it is clear that 69.17% of respondents are satisfied

with the performance of Tax Saving Scheme and 30.83 % of the respondents are

not satisfied.

CHART - 13

SATISFACTION TOWARDS PERFORMANCE

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TABLE - 14

FACTORS TO BE GIVEN IMPORTANCE BY HDFC

OPINION NO OF RESPONDENTS PERCENTAGECUSTOMER SATISFACTION

17 18.33

PRODUCT PERFORMANCE

29 43.33

CREATING AWRENESS 24 28.33COMPETING THE RIVALS

21 9.16

OTHERS 29 24.16TOTAL 120 100

INFERENCE:

From the above table it is clear that, 43.33 % of respondents are of

opinion that Product performance should be given importance, 28.33 % of

respondents feel that importance should be given to Creating Awareness, 24.16

33

% of respondents opt for others, 18.33 % of the respondents insist Customer

satisfaction and 9.16 % is on the opinion of competing the rivals.

CHART - 14

TABLE – 15

SATISFACTION LEVEL OF RESPONDENTS

OPINION NO OF RESPONDENTS PERCENTAGEVERY GOOD 22 18.33GOOD 52 43.33MEDIUM 34 28.33BAD 11 9.16VERY BAD 1 0.83

TOTAL 120 100

INFERENCE:

From the above table, it is clear that 43.33 % of respondents feel HDFC

Mutual Funds is good, 28.33 % of feels that is medium, 18.33 % of respondents

feels that it is very good, 9.16 % of respondents feels it is bad and 0.83 % of

respondents feels it is very bad.

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CHART - 15

CALCULATION OF RETURNS FOR HDFC – TAX SAVER (ELSS)

DATE NAVAVERAGE RETURN

SENSEXAVERAGE

BENCHMARK RETURN

31/1/2005 63.41 1768.2531/1/2006 116.56 83.81958682 2585.95 46.2434610531/1/2007 146.13 25.36890872 3393.1 31.21290048

AVERAGE RETURN 54.59425RISK 41.33087

SHARPE'S INDEX 1.199932BETA 219.6366 112.9588755 1.944394

TREYNOR'S INDEX 25.50627AVE BENCHMARK

RETURN38.72818

Average Return = Total Return n = 83.81+25.36/2 = 54.59

Risk = Standard Deviation (σ) of Average Return = STDEV (54.59) = 41.33

Average Benchmark Return = Total Benchmark Return n

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= 46.24+31.21/ 2 = 38.72

Sharpe’s Index = Average Return – Risk Free Rate Total Risk (σ) = 54.59 – 5 41.33 =1.19

Beta (β) = Covariance of Average Benchmark Return and Average Return = Covariance (46.24:31.21, 83.81:25.36) = 1.94

Treynor’s Index = Average Return – Risk Free Rate Beta (β) = 54.29 – 5 1.94 = 25.

CALCULATION OF RETURNS OF PRUDENTIAL ICICI – TAX PLAN (ELSS)

DATE NAVAVEARGE RETURN

SENSEXAVERAGE

BENCHMARK RETURN31/1/2005 44.06 2057.131/1/2006 76.27 73.10485701 3001.1 45.8898449331/1/2007 93.75 22.91857873 4082.7 36.04011862


SHARPES INDEX 1.21204BETA 123.5803 48.50855413 2.547598

TREYNORS INDEX 16.88325AVE BENCHMARK

RETURN40.96498

Average Return = Total Return N = 73.10+22.91/ 2 = 48.01 Risk = Standard Deviation (σ) of Average Return. =STDEV(48.01) = 35.48

Average Benchmark Return = Total Benchmark Return

36

n = 45.88 + 36.04 / 2 = 40.96

Sharpe’s Index = Average Return – Risk Free Rate Total Risk (σ) = 48.01- 5 35.48 = 1.21


Treynor’s Index = Average Return – Risk Free Rate Beta (β) = 48.11 - 5 2.54 = 16.88

CALCULATION OF RETURNS OF FRANKLIN TEMPLETON TAX SHIELD (ELSS)

FRANKLIN TEMPLETON MF-TAX SHIELD


SENSEXAVERAGE BENCHMARK

RETURN31/1/2005 65.48 1768.2531/1/2006 106.32 62.37018937 2585.9 46.2406333931/1/2007 130.01 22.28179082 3393.1 31.21543757




RETURN38.72804

Average Return = Total Return n = 62.37 + 22.28 / 2 = 42.32

Risk = Standard Deviation (σ) of Average Return. = STDEV (42.32) =28.34


37

= 46.24 + 31.21 / 2 = 38.72

Sharpe’s Index = Average Return – Risk Free Rate Total Risk (σ) = 42.32 – 5 28.34 = 1.316

Beta (β) = Covariance of Average Benchmark Return and Average Return = Covariance (46.24:31.21, 62.37:22.28) =1.33

Treynor’s Index = Average Return – Risk Free Rate Beta (β) = 42.32 – 5 1.33 = 27.9

CALCULATION OF RETURNS OF SUNDARAM BNP PARIBAS TAX SAVER (ELSS)



RETURN31/1/2005 13.3806 868.7631/1/2006 22.9837 71.7688295 1251.26 44.0282701831/1/2007 28.5725 24.31636334 1691.45 35.17973882




RETURN39.604


Risk = Standard Deviation (σ) of Average Return. = STDEV (48.04) = 33.55


38

= 44.02 + 35.17 2 =39.604


Beta (β) = Covariance of Average Benchmark Return and Average Return = Covariance (44.02:35.17,71.76:24.31) = 2.68

Treynor’s Index = Average Return – Risk Free Rate Beta (β)

= 48.04 – 5 2.68 = 16.05

CALCULATIONS OF RETIURNS OF BIRLA SUNLIFE – TAX RELIEF (ELSS)



RETURN31/1/2005 126.4 868.7631/1/2006 188.78 49.35126582 1251.26 44.0282701831/1/2007 150.37 -20.346435 1691.45 35.17973882




RETURN39.604

Average Return = Total Return n = 49.35 + -20.34 = 14.50

Risk = Standard Deviation (σ) of Average Return = STDEV (14.50) =49.28

Average Benchmark Return = Total Benchmark Return n = 44.02 + 35.17

39

= 39.60


Beta (β) = Covariance of Average Benchmark Return and Average Return = Covariance (44.02:35.17,49.35:-20.34) = 3.93 Treynor’s Index = Average Return – Risk Free Rate Beta (β) = 14.50 – 5 3.93 = 2.41

CALCULATION OF RETURNS OF AVIVA - ULIP



RETURN31/1/2005 20.449 1768.2531/1/2006 25.709 25.72252922 2585.95 46.2434610531/1/2007 30.295 17.83811117 3393.1 31.21290048




RETURN38.72818




40

= 46.24 + 31.21 = 38.72



Treynor’s Index = Average Return – Risk Free Rate Beta (β) = 21.78 – 5 0.26 =63.97

CALCULATIONS OF RETURNS OF MAX NEWYORK LIFE - ULIP



RETURN31/1/2005 11.13 2057.631/1/2006 15.37 38.0952381 3001.1 45.8543934731/1/2007 19.32 25.69941444 4082.7 36.04011862




RETURN40.94726

Average Return = Total Return N = 38.09 + 25.69 / 2 = 31.89


Average Benchmark Return = Total Benchmark Return n = 45.85 + 36.04

41

2 = 40.94

Sharpe’s Index = Average Return – Risk Free Rate Total Risk (σ) = 31.89 – 5 8.76

= 3.08



CALCULATION OF RETURNS OF KOTAK – ULIP



RETURN31/1/2005 14.365 2057.631/1/2006 17.875 24.43438914 3001.1 45.8543934731/1/2007 22.063 23.42937063 4082.7 36.04011862




RETURN40.94726



Average Benchmark Return = Total Benchmark Return n = 45.85 + 36.04 / 2 = 40.94

42



Treynor’s Index = Average Return – Risk Free Rate Beta (β) = 23.93 – 5 0.051 = 369.74CALCULATION OF RETURNS FOR ICICI – ULIP



RETURN31/1//2005 24.64 868.7631/1/2006 35.53 44.19642857 1251.26 44.0282701831/1/2007 47.21 32.87362792 1691.45 35.17973882




RETURN39.604

Average Return = Total Return N = 44.19 + 32.87 / 2 =38.53 Risk = Standard Deviation (σ) of Average Return. = STDEV (38.53) =8.006

Average Benchmark Return = Total Benchmark Return n = 44.02 + 35.17 2 = 39.60

Sharpe’s Index = Average Return – Risk Free Rate

43

Total Risk (σ) = 38.53 – 5 8.006 = 4.188


Treynor’s Index = Average Return – Risk Free Rate Beta (β) = 38.33 – 5 0.63

= 52.41

CALCULATION OF RETURNS FOR HDFC - ULIP



RETURN31/1/2005 25.3679 2057.631/1/2006 41.0626 61.86834543 3001.1 45.8543934731/1/2007 54.2531 32.12290503 4082.7 36.04011862




RETURN40.94726



Average Benchmark Return = Total Benchmark Return n = 45.85 + 36.04 2 = 40.94

Sharpe’s Index = Average Return – Risk Free Rate

44

Total Risk (σ) = 46.99 – 5 21.03 = 1.99



TABLE OF SHARPE’S RATIO

FUNDAVERAGE RETURN

RISK FREE RATE

STANDARD DEVIATION

SHARPE’S INDEX

RANKS

HDFC 54.59 0.05 41.33 1.19 4PRUDENTIAL ICICI

48.01 0.05 35.48 1.21 3

FRANKLIN TEMPLETON

42.32 0.05 28.34 1.31 1

SUNDARAM BNP PARIBAS

48.026 0.05 33.55 1.28 2

BIRLA SUNLIFE

14.50 0.05 49.28 0.19 5

ULIPAVERAGE RETURN

RISK FREE RATE

STANDARD DEVIATION

SHARPE’S INDEX

RANKS

AVIVA 21.78 0.05 5.57 3.009 4

MAX NEW YORK LIFE

31.89 0.05 8.76 3.06 3

KOTAK 23.93 0.05 0.71 26.64 1ICICI 38.53 0.05 8.06 4.18 2HDFC 46.99 0.05 21.03 1.99 5

INFERENCE:

Larger the sharpe index better the fund has performed. Thus in ELSS,

Franklin Templeton ranked as better fund as its index is 1.31. Then, Sundaram

45

follows as its index is 1.28, then Prudential ICICI as 1.21, HDFC as 1.19 and

Birla Sunlife as 0.19.

In ULIP Kotak ranked as better plan as its index is 26.64, then ICICI

follows to it as its index is 4.18, then Max New York Life ranked as its index is

3.06, AVIVA follows next as 3.009 and then HDFC ranked as its index is 1.99.

The inference shows that sharpe index in ULIP shows higher value than

ELSS. This is because of the ULIP’s lesser risk than ELSS. At the same time the

expenses incurred in ULIP is quite higher than ELSS which may result a different

solution.

INFERENCE ON TREYNOR’S INDEX

FUNDAVERAGE RETURN

BETARISK FREE RATE

TREYNOR’S INDEX

RANKS

HDFC 54.59 1.94 0.05 25.50 2PRUDENTIAL ICICI

48.01 2.54 0.05 16.88 3

FRANKLIN TEMPLETON

42.32 1.33 0.05 27.97 1

SUNDARAM BNP PARIBAS

48.026 2.68 0.05 16.05 4

BIRLA SUNLIFE

14.50 3.93 0.05 2.41 5

ULIPAVERAGE RETURN

BETARISK FREE RATE

TREYNOR’S INDEX

RANKS

AVIVA 21.78 0.26 0.05 63.97 2MAX NEW YORK

31.89 0.63 0.05 42.59 4

KOTAK 23.93 0.05 0.05 369.74 1ICICI 38.53 0.63 0.05 52.41 3HDFC 46.99 1.51 0.05 27.17 5

INFERENCE:

Treynor’s Ratio relates a portfolio’s excess return to non-diversifiable or

systematic risk (as measured by beta coefficient). In case of ELSS Franklin

Templeton holds the first rank, in case of HDFC its portfolio is perfectly

46

diversified as the two measures gives identical rankings, Prudential ICICI holds

third rank, Sundaram BNP Paribas holds fourth rank and Birla holds the fifth. In

case of ULIP Kotak holds first rank, Aviva holds the second, ICICI holds the third

Max New York Life holds fifth and HDFC holds the fifth rank.

Based on the above calculations as both Sharpe’s and Treynor’s ratio are

considered ELSS portfolios are perfectly diversified

47

WEIGHTED AVERAGE

Weighted Average Method – 1

The following is a weighted average rating method used to find the level of

satisfaction with HDFC mutual funds given by the respondents.

WEIGHTED AVERAGE OF SATISFACTION LEVEL TOWARDS HDFC MUTUAL FUNDS

OptionsNo. of

Respondents (X)Weights (X) (W) (X)

Very Good 22 1 22Good 52 2 104

Medium 34 3 102Bad 11 4 44

Very Bad 1 5 5TOTAL 120 277

Xw = ΣWX = 277 ΣW 120

=2.3

Weighted average for the option Good = 2

INFERENCE:

On the average the customers are satisfied with HDFC Mutual Funds.

48

Weighted Average Method – 2

The following weighted average analysis was done to find opinion on

priority about the preferred Investment Alternative.

RankPreference

R1(X1) R2(X2) R3(X3) R4(X4) R5(X5) R6(X6) R7(X7)

Mutual Funds

19 26 24 21 21 4 5

Share Market

21 20 22 22 13 12 10

Bonds 14 15 26 20 19 12 10Deposits 30 35 13 20 14 4 4P.O.Savings 10 10 4 14 14 33 35Insurance 19 10 25 10 24 19 13Derivatives 8 3 3 14 13 36 43

XW = ΣWX / ΣW

Mutual Funds = (19 x 7) + (26 x 6) + (24 x 5) + (21 x 4) + (21 x 3) + (4 x 2) + (5 x 1) / 28

= 569 / 28 = 20.32

Share Market = (21 x 7) + (20 x 6) + (22 x 5) + (22 x 4) + (13 x 3) + (12 x 2) + (10 x 1/ 28

= 598 / 28 = 21.35

Bonds = (14 x 7) + (15 x 6) + (26 x 5) + (20 x 4) + (19 x 3) + (12 x 2) + (10 x 1) /28

= 489 / 28 = 17.46

Deposits = (30 x 7) + (35 x 6) + (13 x 5) + (20 x 4) + (14 x 3) + (4 x 2) + (4 x 1) / 28

= 619 / 28 = 22.10

49

Post Office = (10 x 7) + (10 x 6) + (4 x 5) + (14 x 4) + (14 x 3) + (33 x 2) Savings + (35 x 1) / 28 = 349 / 28 = 12.46

Insurance = (19 x 7) + (10 x 6) + (25 x 5) + (10 x 4) + (24 x 3) + (19 x 2) + (13 x 1) / 28

= 481 / 28 = 17.17

Derivatives = (8 x 7) + (3 x 6) + (3 x 5) + (14 x 4) + (13 x 3) + (36 x 2) + (43 x 1) / 28

= 299 / 28 = 10.6

Analysis:

To find out the major preference of Investment Alternatives by the respondents.

Investments Weightage RankMutual Funds 20.3 3Share Market 21.4 2Bonds 17.5 4Deposits 22.1 1Post Office Savings 12.5 6Insurance 17.2 5Derivatives 10.6 7

INFERENCE:

From the above table it is clear that Deposits holds the first rank, Share

Market holds second rank, Mutual Funds holds third rank, Bonds holds fourth

rank, Insurance holds fifth rank, Post Office Savings holds sixth rank and

Derivatives holds seventh rank.

50

CHI-SQUARE ANALYSIS

Chi-Square Test-1

Chi-Square test to find the relationship between nature of investment and choice

of schemes.

HYPOTHESIS

Null Hypothesis (Ho):

There is no significant relationship between the nature of investment and choice

of schemes.

Alternate Hypothesis (H1):

There is significant relationship between the nature of investment and choice of

schemes.

Observed Frequencies:

SchemesInvestment

ELSS ULIP Others Nil TOTAL

Mutual Fund

8 3 7 4 22

Insurance 5 4 9 6 24Shares 4 4 8 6 22Deposits 11 3 2 3 19Real Estate 1 1 6 2 10Others 7 7 7 2 23

TOTAL 36 22 39 23 120 Expected Frequencies:

6.6 4.03 7.15 3.737.2 3.52 7.8 4.66.6 4.03 7.15 3.735.7 3.48 6.18 3.643 1.83 3.25 1.926.9 4.22 7.48 4.4

51

X² TABLE:Oi Ei (Oi – Ei) (Oi – Ei)² (Oi – Ei)² / Ei8 6.60 1.40 1.96 0.293 4.03 -1.03 1.06 0.267 7.15 -0.15 0.0225 0.0034 3.37 0.63 0.40 0.1175 7.20 -2.20 4.84 0.674 3.52 0.48 0.23 0.0659 7.80 1.20 1.44 0.1846 4.60 1.40 1.96 0.424 6.60 -2.60 6.76 1.024 4.03 -0.03 0.0009 0.000228 7.15 0.85 0.73 0.1016 3.37 2.63 6.92 2.052

11 5.70 5.30 28.09 4.933 3.48 -0.48 0.23 0.0662 6.18 4.18 17.47 2.823 3.64 -0.64 0.409 0.1121 3.00 -2.00 4.00 1.331 1.83 -0.83 0.68 0.3726 3.25 2.75 7.56 2.332 1.92 0.08 0.0064 0.00337 6.90 0.10 0.01 0.00147 4.22 2.78 7.73 1.837 7.42 -0.42 0.18 0.0232 4.41 -2.41 5.80 1.315

TOTAL 20.309

Now X² = Σ (Oi-Ei)² / Ei

(i.e.,) Calculated X² = 20.309

Degrees of Freedom = (r-1) (c-1)

= (4-1) (6-1) = 15.

The tabulated value of X² at 15 degrees of 0.05 level of significance is 24.309.Calculated value = 20.309Tabulated value = 24.906. 20.309 < 24.906

Calculated value is less than the tabulated value. Hence the Null Hypothesis is accepted.

INFERENCE: There is no relationship between nature of investment and choice of schemes.

52

Chi-Square Test – 2

Chi-Square test to find out the relationship among awareness of

customers and qualification of respondents.

HYPOTHESIS


There is no significant relationship among awareness of customers and



There is significant relationship among awareness of customers and qualification

of respondents.


QualificationAwareness

SSLC +2 UG PG TOTAL

Yes 5 17 39 24 85No 4 3 15 13 35TOTAL 9 20 54 37 120

Expected Frequencies:

6.375 14.17 38.25 26.202.63 5.83 15.75 10.791

X² TABLE

Oi Ei (Oi-Ei) (Oi-Ei)² (Oi-Ei)² / Ei5 6.38 -1.37 1.88 0.29417 14.17 2.84 8.06 0.56939 28.25 0.75 0.56 0.01524 26.20 -2.2 4.84 0.1854 2.63 1.37 1.88 0.7153 5.83 -2.83 8.008 1.37315 15.75 -0.75 0.56 0.03613 10.79 2.21 4.88 0.452TOTAL 3.639

53

Now X² = Σ(Oi-Ei)² / Ei

(i.e.,) Calculated X² = (r-1) (c-1)

=(2-1) (4-1)

= 3.

The tabulated value of X² at 3 degrees of 0.05 level of significance is 7.815.

3.639 < 7.815

The calculated value is less than the tabulated value. Hence the Null Hypothesis

is accepted.

INFERENCE:

There is no significant relationship among awareness of customers and


54

Chi-Square Test – 3

Chi-Square test to find the relationship between drawbacks in promoting

products and choice of investment.

HYPOTHESIS


There is no significant relationship between reasons to influence decision of

investors and range of income.


There is significant relationship between reasons to influence decision of



PreferenceIncome

Risk Free

High Return

SecureBetter Margin

Interest TOTAL

< 20000 8 16 8 13 11 5620-50000 5 12 7 9 5 3850-80000 3 2 5 2 2 14> 80000 3 3 2 3 1 12

TOTAL 19 33 22 27 19 120

Expected Frequencies:

8.87 15.4 10.27 12.6 8.876.01 10.45 6.97 8.55 6.012.22 3.85 2.57 3.15 2.211.90 3.3 2.2 2.7 1.90

55

X² TABLE

Oi Ei (Oi-Ei) (Oi-Ei)² (Oi-Ei)² / Ei8 8.87 -0.87 0.76 0.578

16 15.4 0.6 0.36 0.0238 10.27 -2.27 5.15 0.501

13 12.6 0.4 0.16 0.01211 8.87 2.13 4.54 0.5115 6.02 -1.016 1.03 0.172

12 10.45 1.85 3.42 0.337 6.97 0.03 0.0009 0.000139 8.55 0.45 0.203 0.0245 6.02 -1.016 1.32 1.1713 2.22 0.783 0.613 0.282 3.85 -1.85 3.42 0.895 2.57 2.43 5.90 2.32 3.15 -1.15 1.32 0.422 2.22 -0.217 0.047 0.023 1.9 1.1 1.21 0.643 3.3 -0.3 0.09 0.0272 2.2 -0.2 0.04 0.0183 2.7 0.3 0.09 0.0331 1.9 -0.9 0.81 0.43

TOTAL 8.38 Now X² = Σ (Oi-Ei)² / Ei

(i.e.,) Calculated value X² = 8.38

Degrees of Freedom = (r-1) (c-1)

=(4=1) (5-1)

= 12.

The tabulated value of X² at 12 degrees of 0.05 level of significance is 21.026Calculated value = 8.38

Tabulated value = 21.026

8.38 < 21.026 Calculated value is less than the tabulated value. Hence the Null Hypothesis is

accepted.

INFERENCE

56

There is no significant relationship between reasons to influence decision

of investors and range of income

ANOVA

The following is an Analysis of variance done to find the relation between

the range of income and risk taking capacity.

HYPOTHESIS


There is no significant relationship between the range of income and risk taking

capacity.


There is significant relationship between the range of income and risk taking

capacity.

X1 X2 X3 X²1 X ²2 X²314 29 11 196 841 12120 14 4 400 196 164 8 2 16 64 44 8 2 16 64 442 59 19 628 1165 145

Step :1: T = Σx ; = 42 + 59 + 19 = 120

Step :2 : CF(correction factor)= T²/n = (120)²/12 = 1200.

Step :3 : Total Sum of Squares (TSS) = Σxi²- CF

= (628 + 1165 + 145) – 1200

= 1938 – 1200

= 738.

Step :4 : Between Sum of Squares (BSS)= [(42)² + (59)² + (19)² ] - CF

4 4 4

= (441 + 870.25 + 90.25 ) – 1200.

= 201.5

Step :5 : Error Sum of Squares (ESS) = TSS - BSS

57

= 738 – 201.5

= 536.5.

Source Degree of Freedom

Sum of Squares

Mean Sum of Squares

F ratio

BSS 201.5 3 – 1= 2 201.5 / 2= 100.75

F = 100.75 / 59.61= 1.69

ESS 536.5 12 – 3 = 9 536.5 / 9= 59.61

The calculated value F = 1.69

Degree of Freedom r 1 = 2 ; r 2 = 9

Level of Significance = 5 % = 0.05

(i.e.,) Tabulated value F2,9,0.05 = 4.26.

1.69 < 4.26

The calculated value is less than the tabulated value. Hence the Null Hypothesis

is accepted.

INFERENCE

There is no significant relationship between the range of income and risk

taking capacity.

The following is an Analysis of variance done to find the relation between

the range of income and risk taking capacity.

HYPOTHESIS


There is no significant relationship between drawbacks in promoting products

and choice of investment.


There is significant relationship between drawbacks in promoting products and choice of

investment.

X1 X2 X3 X4 X5 X6 X1² X2² X3² X4² X5² X6²

3 3 5 3 - 3 9 9 25 9 - 9

58

3 9 3 5 3 6 9 81 9 25 9 36

5 3 4 3 4 5 25 9 16 9 16 25

6 2 3 5 - 5 36 4 9 25 - 25

6 7 6 4 2 4 36 49 36 16 4 16

23 24 21 20 9 23 115 152 95 84 29 111

Step :1: T = Σx ; =23 + 24 + 21 + 20 + 9 + 23 = 120

Step :2 : CF(correction factor)= T²/n = (120)²/12 = 1200.

Step :3 : Total Sum of Squares (TSS) = Σxi²- CF

= (628 + 1165 + 145) – 1200

= 1938 – 1200

= 738.

Step :4 : Between Sum of Squares (BSS)= [(42)² + (59)² + (19)² ] - CF

4 4 4

= (441 + 870.25 + 90.25 ) – 1200.

= 201.5

Step :5 : Error Sum of Squares (ESS) = TSS - BSS

= 738 – 201.5

= 536.5.

Source Degree of Freedom

Sum of Squares

Mean Sum of Squares

F ratio

BSS 201.5 3 – 1= 2 201.5 / 2= 100.75

F = 100.75 / 59.61= 1.69

ESS 536.5 12 – 3 = 9 536.5 / 9= 59.61

The calculated value F = 1.69

Degree of Freedom r 1 = 2 ; r 2 = 9

Level of Significance = 5 % = 0.05

(i.e.,) Tabulated value F2,9,0.05 = 4.26.

6. FINDINGS OF THE STUDY

59

It is found that 72.5% of the investors in ELSS were male.

Most of the respondents monthly income is less than Rs.20000. [46.67%]

33 % of the respondent’s are fall under Other’s category and then from IT

sector 20.83 % and Self employment 20 %.

Among the respondents, 45% of the respondents have completed their under

graduation.

20% of the respondents invest in Insurance normally.

It is found that the majority of the respondents who invested in mutual funds

are under the age group between 41-50. (32.5%)

Most of the respondents have been influenced by the high return to choose a

particular investment.

Majority of the respondents are aware of tax saving schemes.

Among all respondents, it is found that 31.67% of the respondents consider

Equity linked saving scheme to be performing better.

It is found that, 24.16% of the respondents have chosen the investment for

the purpose of tax saving while 23.33% of the respondents have chosen in

anticipation of future expectations.

47.5% of the respondents are willing to take only moderate risk with respect

to their investment.

It is found that 34.17% of the respondents expect more than 20% of return.

60

Among it is found that 45% of the respondents prefer to go for mid-term

investments.(i.e.) 3 years to 5 years.

69.17 % of the respondents are satisfied with the performance of tax saving

scheme.

Majority of the respondents have chosen deposits as the preferred avenue of

investment.

43.33 % of respondents are of opinion that product performance should be

given more importance.

Among the respondents 43.33 % of respondents feel HDFC Mutual Funds is

Good, while 28.33% of the respondents have medium satisfaction towards

HDFC Mutual Funds.

There is no relationship between nature of investment and choice of

schemes.

There is no significant relationship between drawbacks in promoting products

and choice of investment.

There is no significant relationship between the range of income and risk

taking capacity.

There is no significant relationship between reasons to influence decision of


Sharpe’s index in ULIP shows higher value than ELSS. This is because of the

ULIP’s lesser risk than ELSS. At the same time the expenses incurred in

ULIP is quite higher than ELSS which may result a different solution.

61

Larger the Sharpe’s index better the fund has performed. Thus in ELSS,

Franklin Templeton ranked as better fund as its index is 1.31. Then,

Sundaram follows as its index is 1.28, then Prudential ICICI as 1.21, HDFC

as 1.19 and Birla Sunlife as 0.19.

HDFC’s portfolio is perfectly diversified as the two measures Sharpe’s index

and Treynor’s index gives identical rankings.

ELSS Franklin Templeton holds the first rank, in case of HDFC holds second

rank, Prudential ICICI holds third rank, Sundaram BNP Paribas holds fourth

rank and Birla holds the fifth as per Treynor’s ratio.

7. SUGGESTIONS AND RECOMMENDATIONS

62

From the analysis it is found that most of the respondents were under the

age group 41 to 50 and are coming under the income level of below

Rs.20000 per month. So the company has to concentrate the above said

income levels and attract the age group of 41 to 50.

Majority of the respondents is in the opinion that HDFC should give more

importance on product performance. Hence the company should

concentrate more on product performance.

Most of the respondents are influenced by high return. Hence the

company should make awareness among the people about its return

earning capacity.

Investors are considering ELSS as the better tax saving scheme. So the

company should make necessary arrangements to make more advantage

on this.

Most of the respondents are willing to take moderate risk, preferring mid

term investment and expecting more than 20 % of returns. Hence the

company should act accordingly.

The company satisfies the customers and at the same time it should

improve its relationship towards its customers.

8. CONCLUSION

63

The study is based on the primary data specially collected for the purpose

of creating a deeper understanding of the changing habits of investment

preferences of investors with regard to the current and future scenario of

investments. Special attention has been given bring to out the concerns of

investors towards Equity Linked Saving Scheme.

The major strands of the analysis may now brought together in order to

derive a broad picture about factors that influence the investor to go for a

particular investment, expectations of investors in terms of return from their

investment and to understand the needs of the investors.

Examination of the perception of investors towards ELSS and its actual

performance is a major part of this study. From the study it was found that ELSS

had a high preference towards the available tax saving instruments, followed by

Unit Linked Insurance Plan.

This study identifies the scenario of Tax Saving Schemes and the

investors risk willingness, expectations in the form of return expected from their

investment and the basic needs of the investors. The observations from the study

will be useful for HDFC which leads to customer satisfaction and in turn it may

generate revenue to the company.

BIBLIOGRAPHY

64

BOOKS REFERRED:

Punithavathy Pandian, “Security Analysis and Portfolio Management”, 3 rd edition,

Vikas Publishing House Pvt Ltd, New Delhi, 2001.

V.K.Bhalla, “Investment Management” ,11th edition Sulthanchand and company

Ltd, New Delhi, 2004.

A.Singaravelu and R.Senapathy, “Quantitative Methods in Business”,3rd edition,

Meenakshi Agency,Chennai,edition 2004.

Kothari C.R., “Research Methodology”, 10th edition, Wishwa Prakashan

Publucations,2000.

JOURNALS:

Business Line,

Economic Times,

Dalal Street.

e REFERENCES:

www.hdfcfunds.com

www.hdfcinsurance.com

www.icicidirect.com

www.bseindia.com

www.crisilindia.com

www.amfi.com

www.valueresearch.com

QUESTIONNAIRE

1) Name :

Address :

65

http://www.valueresearch.com/

http://www.amfi.com/

http://www.crisilindia.com/

http://www.bseindia.com/

http://www.icicidirect.com/

http://www.hdfcinsurance.com/

http://www.hdfcfunds.com/

Phone :

Gender : Male Female

Age : 20-30 31-40 41-50 ABOVE 50

Qualification: SSLC +2 UG PG

2) NATURE OF OCCUPATION:

IT Manufacturing Self Employment Govt Sector

Others

3) YOUR INCOME RANGE: (per month)

Below Rs.20000 Rs.20-50000 Rs. 50-80000

Above Rs.80000

4) WHERE DO YOU INVEST NORMALLY

Mutual Funds Insurance Shares Deposits

Real Estate Others

5) REASON FOR THE ABOVE INVESTMENT

Risk Free High Return Secure Better Margin Interest.

6) ARE YOU AWARE OF TAX SAVING SCHEMES

Yes No

7) WHICH TAX SAVING INVESTMENT YOU CONSIDER BETTER

ELSS ULIP Others Nil

66

8) REASONS FOR CHOOSING A PARTICULAR INVESTMENT

OPTION

Tax Benefit Future Expectations Performance

Liquidity /Flexibility Just to save my surplus

9) MENTION YOUR RISK TAKING CAPACITY

High risk High return

Moderate risk Moderate return

Low risk Low return.

10) MENTION YOUR PREFERRED TENURE OF INVESTMENT

Short term (within 3 years)

Mid term (3 years – 5 years)

Long term. (Above 5 years)

11) WHAT IS THE LEVEL OF RETURN EXPECTED IN PERCENTAGE

IN A YEAR FROM YOUR INVESTMENT

Less than 10 % 11 - 15 % 15 – 20 % Above 20 %

12) ARE YOU SATISFIED WITH THE PERFORMANCE OF TAX

SAVINGS SCHEME

Yes No

67

13) RANK YOUR PREFERRED INVESTMENT ALTERNATIVE

S.NO PARTICULARS RANK

1 Mutual Funds

2 Share Market

3 Bonds

4 Deposits

5 Post Office Savings

6 Insurance

7 Derivatives

14) WHICH AREA DO YOU FEEL THAT HDFC MUTUAL FUND

SHOULD GIVE MORE IMPORTANCE

Customer Satisfaction Product Performance

Creating Awareness Competing the rivals Others

15) SATISFICATION LEVEL WITH HDFC MUTUAL FUNDS

Very Good Good Medium Bad Very bad

16) SUGGESTIONS:

68

Documents

Comparative Study Between Ulip & Elss